Affordable housing witness 27% jump in new units launched across top eight cities

This is mainly due to governments decision to incentivise affordable housing through industry status and many developers showning an interest in developing such projects.Sobia Khan | ET Bureau | October 09, 2017, 14:05 IST

BENGALURU: Affordable housing sector has recorded a surge of 27%% in new units launched (y-o-y) across top eight cities in the country. This is mainly due to governments decision to incentivise affordable housing through industry status and many developers showning an interest in developing such projects.

Affordable housing segment demonstrated strongest trends to record a 27% increase in the new units launched in these cities. More than 26,000 new units have been launched in 2017 so far. Of the total new launches in affordable units, 40% were in Mumbai (10,500 units), followed by Kolkata and Pune. All other categories have seen a decline with high–end (-66%) and luxury (-84%) segments witnessing a significant drop in new launches, mentioned a report by Cushman and Wakefield.“Affordable housing is an attractive proposition both for developers and consumers as the demand is huge and largely unmet. The high focus of the central government has resulted in the availability of more funding options for the developers such as ECB, FDI and debt financing from national financial institutions at highly competitive rates. However, there are challenges for affordable housing projects in Tier 1 cities, where land costs and availability within established locations is very difficult," said Anshul Jain, Managing Director, India Cushman & Wakefield.

With Govt of India’s focus on “Housing for All”, affordable housing segment is expected to continue its momentum. The segment caters to the unmet demand of a large section of the Indian population looking for affordable housing options. To ensure that the momentum continues, the government could also explore adding a few incentives on land acquisition costs as land cost is the largest component of project costs.

However, overall residential unit launches recorded a decline of 33%, and was at approximately 60,000 units in the first three quarters of 2017 (January – September), mentioned a recent report by Cushman and Wakefield.

"Going forward, we expect continued skepticism from developers in announcing new projects as end-user sentiments are expected to remain cautious. Meanwhile, developers will focus on reducing their existing unsold inventories through more attractive offers of discounts, payment plans, freebies and gifts to take advantage of the current festive season as traditionally end-users buy more in this period," said Jain.

Mumbai (+1%) saw the highest number of launches at over 19,400 new residential units till September 2017. Of the total launches in Mumbai affordable housing sector was close to 10000 units registering a rise of 300% over same time last year. Mumbai was followed by Pune (8,400) and Bengaluru (8,200) both registering a y-o-y decline in of 41 % and 48% respectively in the total number of new residential units launched. Chennai saw the steepest decline in new launches, which was lower by over 50% in YTD 2017 over same time last year. The city only saw 2,700 new homes due to a massive slowdown in construction due to prolonged political uncertainty and delayed notification of RERA in the state.

Currently, the Goods and Services Tax (GST) is levied at 12 per cent on payments made for under-construction property or ready-to-move-in flats where completion certificate has not been issued at the time of sale.